The reversal in China's monetary policy is having an unexpected
effect on the Currency Shares Euro Trust (NYSE: FXE)
Chart Courtesy of StockCharts.com
China has made three moves to reverse its aggressive monetary
policy within a week. Yet, instead of seeing money flow into
the U.S. dollar, the Euro is appreciating.
That suggests that China may be further diversifying its foreign currency reserves
away from the U.S. dollar, and it has some implications.
First, it suggests that China now has enough money and muscle to influence the
foreign exchange markets, both via policy and by trading.
Second, if the markets decide to go against the current trend, it could lead
to increasing market volatility.
In other words, we could be witnessing the beginning of a much bigger set of
circumstances here than meets the eye. What we're saying is that this is the
beginning of something that could both last a while and have some significant
repercussions.
Most alarming is that U.S. policy makers are too consumed with politics to see
that the rest of the world is starting to move away from the U.S. as the world's
economic and political leader and that it's because of the mismanagement of policy
from Washington that has taken place over the last several decades.
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